Banknotes will continue to play vital role as digital payments increase

Banknotes will continue to play vital role as digital payments increase

Smithers Pira forecasts that banknotes will continue to play a vital role in society well into the middle of this century.

The growth of alternative payment systems over the past decade has recently led to several commentators suggesting that we are moving towards a cashless society, and that banknotes will gradually be phased out as payments are made digitally, according to Smithers Pira. Other commentators argue that the time has already come and cash is already in decline.

The Lifecycle of Banknotes: Scenarios and Forecasts to 2022 offers an extensive overview of the key drivers and trends of banknote demand over the period from 2012 - 2022. This report details design trends, substrates and security technologies, printing, circulation and cash handling, and addresses the unmet needs of central banks.

In the UK, the Bank of England has shown no signs of abating the quantity of currency that is in circulation, which has continued to increase since the middle of the 20th century. As a percentage of GDP, cash has diminished from 6% of GDP in the early 1970s to around 3% today, but the number of banknotes - especially £20 notes - in circulation has continued to rise, rather than decline.

Some commentators claim new digital technologies, such as pre-paid plastic cards and mobile telephone payments, are already starting to erode the demand for low denomination banknotes and coins in the US. With the number of new payment systems now available in the US, it's expected to be the country where the death of cash first becomes apparent.

The overall number of banknotes printed in the US has declined in recent years; going from an average of nearly 9 billion notes per annum, in the decade 1990 to 1999, down to an average of 8 billion notes per year between 2000 to 2010. Contrary to the suggestion that the use of the $1 bill is in decline, the number of bills in circulation has almost doubled over the last couple of decades, from 5.1 billion in 1990 to 10 billion in 2011.

The need to combat digital counterfeiting (or 'digifeiting') has led to the renewed interest in polymer banknotes and hybrid substrates. This has led to the inclusion of novel design features such as the wide plastic stripe and vertical windows in paper banknotes. At the same time designers for Guardian® polymer have realized that they are not bound by the same restrictions as those which define paper banknote design and have introduced Latitude® as a concept to describe the new design freedom that polymer substrates offer to the modern banknote designer.

Currency printers are gradually realizing that most of the effective security elements are added by the paper mill, rather than the printer, starting with the cylinder-mould watermark, the most ancient of the Z-axis features. As the techniques used to duplicate the X-Y axis printed features of the note continue to evolve, it is forecast that more Z-axis features will be incorporated into the substrate to raise the level of complexity for the counterfeiter.

The future for currency printing over the coming decade will represent a shift from thinking of banknotes as identical units to considering them as unique objects with inimitable traits and characteristics that can be mapped and monitored; and later checked and scrutinized via devices that are connected to the internet.